Correlation Between Microsoft and Look Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft and Look Holdings at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Microsoft and Look Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Look Holdings, you can compare the effects of market volatilities on Microsoft and Look Holdings and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Microsoft with a short position of Look Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Look Holdings.
Diversification Opportunities for Microsoft and Look Holdings
-0.65 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Microsoft and Look is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Look Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Look Holdings and Microsoft is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Microsoft are associated (or correlated) with Look Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Look Holdings has no effect on the direction of Microsoft i.e., Microsoft and Look Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Look Holdings
Assuming the 90 days trading horizon Microsoft is expected to generate 3.47 times more return on investment than Look Holdings. However, Microsoft is 3.47 times more volatile than Look Holdings. It trades about 0.2 of its potential returns per unit of risk. Look Holdings is currently generating about 0.36 per unit of risk. If you would invest 37,655 in Microsoft on September 1, 2024 and sell it today you would earn a total of 2,230 from holding Microsoft or generate 5.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
Microsoft vs. Look Holdings
Performance |
| Timeline |
| Microsoft |
| Look Holdings |
Microsoft and Look Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Look Holdings
The main advantage of trading using opposite Microsoft and Look Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft position performs unexpectedly, Look Holdings can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Look Holdings will offset losses from the drop in Look Holdings' long position.| Microsoft vs. Pentair plc | Microsoft vs. Norwegian Air Shuttle | Microsoft vs. GEELY AUTOMOBILE | Microsoft vs. DELTA AIR LINES |
| Look Holdings vs. SIVERS SEMICONDUCTORS AB | Look Holdings vs. Darden Restaurants | Look Holdings vs. Reliance Steel Aluminum | Look Holdings vs. Q2M Managementberatung AG |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
Other Complementary Tools
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk | |
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. |